The September Job Report

The headline number of nonfarm payroll employment came in below expectations at +51K jobs. However, the rest of the report looks better. The household survey shows growth of 271K jobs and a decrease in the unemployment rate to 4.6%. A decrease of 8K in government employment is also good news. The upward revision of August jobs to 188K is big but the big item is the "Preliminary Estimate of Benchmark Revision to the Establishment Survey".

Each year, the Current Employment Statistics (CES) survey data are benchmarked to comprehensive counts of employment for the month of March derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. For national CES series, the annual benchmark revisions over the last 10 years have averaged plus or minus two-tenths of one percent. The preliminary estimate of the benchmark revision for March 2006 is +810,000

That is that tax returns for unemployment insurance filed by all employers shows much larger employment gains then by tracking the employers in the employment survey. Tax statistics, when available, are much more accurate than survey statistics since they represent all employment.

In the Apr-Mar 06 period NFP increased by 2,029K, employment increased by 3,040K and unemployment decreased from 5.1 to 4.7%. The upward revision of 810K closes most of the gap between NFP and employment. (However, the revision has not correlated with the difference between NFP and employment in the past decade.) In the six months since NFP has increased by 708K and employment has increased by 1,209K. High employment growth with low unemployment claims tend to indicate that NFP is the out-lier statistic that is diverging from the economy and that job growth has been strong.